SINGAPORE--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Bangkok Insurance Public Company Limited (BKI) (Thailand).
These Credit Ratings (ratings) reflect BKI’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The negative outlooks reflect the expectation of an increasingly challenging operating environment for BKI over the near-to-medium term, caused by the prevailing COVID-19 pandemic. AM Best expects this environment to drive heightened pressure and potential volatility on BKI’s operating performance and balance sheet strength fundamentals.
During the first quarter of 2020, BKI reported a 10% reduction in capital and surplus, following a total comprehensive loss of THB 5.3 billion (USD 174 million), primarily due to unrealised fair value losses from equity investments amid the COVID-19 uncertainty. This follows an 11% decline in the company’s capital and surplus during 2019, which was also affected by unfavourable market value movements in its investment holdings. BKI’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was at the strongest level as of year-end 2019. However, capital adequacy remains sensitive to the future market value movements of investments. BKI’s three largest equity holdings have a combined value equivalent to over 70% of its capital and surplus as at December 31, 2019.
The company’s loss ratio increased to 54% in 2019, up from 50% in 2018. The combined ratio and operating ratio for 2019 were 91% and 83%, respectively, above the five-year averages of 88% and 79% (2015-2019). Investment income has been an important source of earnings for BKI over the past five years, accounting for over 40% of its reported pre-tax profits. The market volatility and potential escalation of COVID-19 cases in Thailand may further negatively impact the company’s underwriting and operating results.
AM Best continues to closely monitor the effects of the COVID-19 pandemic and any impact on the rating fundamentals of BKI.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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